76 roundtable: economic recovery ... continued from previous page
way to the exit? Taylor admitted that he started his business 20 years ago having worked in Silicon Valley USA and spotted a software product that he thought would sell well in the UK. “That was my business strategy in its entirety. We had no customers and no sales channels, just a good product that we believed in.” The company made £900,000 in its first year, and we had a choice of continuing and cash- cowing, or trying to build a business with its own intellectual property value, which is what we eventually did.
“If I look back, I was insane to start my business, but I was inspired by working in Silicon Valley and seeing its “Let’s have a go’ culture. That’s what is missing here.
“We have got real talent in this country but we are much more risk averse and there is a stigma if we fail. We need to change that, so that people are encouraged to have a go. People don’t need to be burdened initially by trying to find different types of funding.”
Transition from entrepreneurial startup to managed enterprise was often a stumbling point too, one in which outside help or freshly recruited talent could almost be viewed as a threat by some entrepreneurs, he added.
“Too many people today have a fixation on an exit strategy – we didn’t have one when we started up – and maybe we could learn from the Germans with their Mittelstand approach of family businesses being passed on from generation to generation.”
Several Roundtablers agreed. “Almost every new business plan will have a line in it: ‘Trade sale within three years.’ The notion of the German business model (the Mittelstand) just doesn’t seem to exist,” said Elliott. The focus on exit strategies means fewer mid- tier companies are developing, leading to a widening gap between SMEs and major corporates.
Garden highlighted the problem in UK family and lifestyle businesses, where there was often a long-term focus without a succession plan or exit objective.
Can you show me the
What are the big future
concerns of SMEs? Edwards suggested two concerns:
• Finding the right people and affording them • Cost of retail commercial property. “There has to be a reality check on property values. Landlords are still charging high rents on overvalued stock, despite the market challenge of Internet shopping.”
Smith offered: Penelope Garden
“You end up with 60-70 year-old owner- managers looking to sell but still core to the running of the business, and without a management team below them to push for an MBO. They get stuck in a position where they need to restructure the business, and yet all the time they are getting older and that retirement dream more distant.”
Roundtablers also felt that exit planning was also being encouraged by the financial and professional services sectors, along with the UK tax structure on Entrepreneurs’ Relief and the Enterprise Investment Scheme. “There are advantages on EIS going in, but people are now looking more at the advantages coming out.”
The task of finding and retaining talent
As an MD, Singh-Barmi considered talent management to be his most important role. “Culturally within a business you have got to be upskilling every level of your team. Looking after your people, identifying and acquiring talent is crucial, because that makes the business.
“Also, nowadays people have many jobs. We don’t have a job-for-life attitude. It’s been a massive change, but not necessarily a bad one. It makes for a more dynamic modern business environment, one we should embrace rather than harping back to ‘the good old days’.”
Murray asked if more SMEs were taking on older employees for their business and life experience.
Taylor said that it might add some stability to a company. Graduate employees today often don’t think long term and are happy to do things like take time out travelling once they’ve accumulated some money, which leads to early employment churn. “After two years they become highly valuable and losing them at that point means the business doesn’t really get a return on its investment.”
David Podger
www.businessmag.co.uk
Singh-Barmi: “You just have to go with it, that’s business life. I have no hesitation in training and investing in people, getting the best out of them while they are with us. It is something that just has to be built into your business model.”
David Murray
Houston and Wills cited improved communications as a Thames Valley necessity. “If you live around Reading you can get high- speed broadband, but in the town centre you can only get an ADSL or costly leased line. We have all this office space but no fibre to the town telecom cabinets,” bemoaned Houston.
Taylor was worried that worldwide recognition of the Thames Valley region as ‘the Silicon Valley of Europe’ was being chiseled away by centres set up in Cambridge and London (Tech City, the Silicon Roundabout). “We need to protect our patch, fight for our reputation, because it brings business into our area. We are just sleepwalking into a situation where companies are moving to other countries or parts of the UK, and talent is being drawn elsewhere.”
Podger agreed: “The Thames Valley has a skills provision problem. It has a very good educational system but it is a net exporter of graduates. People don’t stay, and the difficulty for employers is getting graduates to come back.”
Elliott added that ‘complacency’ was one of the Thames Valley’s greatest threats; competitors are often outside the UK therefore Heathrow as the UK’s hub airport is vital, there is value in clustering for businesses in the M40, M4, M3 ‘wedge’, and we need improved infrastructure and affordable housing to attract talent, she exampled.
THE BUSINESS MAGAZINE – THAMES VALLEY – SEPTEMBER 2013
• Upskilling of managements to take companies forward through different phases.
• Funding: “It’s not about borrowing money; it is about how you run the business.”
Wills added. “Funding is more about the concept of working capital management rather than bank-funding.”
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